3 Min Read
* Canadian dollar at C$1.0593 or 94.40 U.S. cents * Bond prices higher across the maturity curve By Leah Schnurr TORONTO, Dec 17 (Reuters) - The Canadian dollar was little changed against the greenback on Tuesday and was expected to stay in a range heading into a Federal Reserve meeting as investors try to gauge whether the central bank could begin winding down its economic stimulus. Data released on Tuesday could give the Fed cover to start dialing back as U.S. consumer prices were flat in November, though the annual inflation rate bounced back from a four-year low. In Canada, a separate report showed Canadian manufacturing sales jumped on strong sales in the food sector. The loonie saw muted reaction to both reports. The Fed will release a statement on Wednesday at the end of its two-day meeting. Investors will be looking for clarity into the path of the central bank's asset purchase program, with some seeing the possibility the Fed could begin reducing its $85 billion a month in bond buys. "I think there's still somewhere around a 30 percent chance that they might begin some sort of modest amount of tapering, in which case we would see the U.S. dollar react positively at the time," said Don Mikolich, executive director of foreign exchange sales at CIBC World Markets in Toronto. A faster timetable for the Fed is seen as a negative for the Canadian dollar because it is expected to reduce the appetite for risk and benefit the U.S. currency. "I would suspect if they do go ahead, it will be in a very modest way (and) any reaction will be more responding to the commencement of the program rather than what the economic implications for it are," said Mikolich. The Canadian dollar was at C$1.0593 to the greenback, or 94.40 U.S. cents, slightly weaker than Monday's close of C$1.0587, or 94.46 U.S. cents. The loonie is likely to trade in the C$1.055 to C$1.0640 range, said Mikolich, though if the Fed does move toward tapering, the C$1.0735 levels could come back into play. The Canadian currency traded as far as C$1.0708 earlier in the month, its lowest level in 3-1/2 years. Canadian government bond prices were higher across the maturity curve, with the two-year up half a Canadian cent to yield 1.113 percent and the benchmark 10-year up 6 Canadian cents to yield 2.668 percent.